Grover Norquist provides cover for tax increase bill

The House Revenue and Tax committee approved a bill that would exempt most farmers from a sales tax on their utilities and a tax increase on timber companies.

The influential tax panel approved HB 1039 by Rep. Jeff Wardlaw, D-Warren, which would provide a sales and use tax exemption on utilities for defined areas of the agricultural sector, such as poultry producers.

The fiscal impact on the measure would take about $10 million annually from state coffers.

Officials from the Department of Finance and Administration said Gov. Beebe opposed the tax cut, which they contend would disrupt the balanced budget submitted by Gov. Mike Beebe last November.

Beebe has only recommended a further reduction of the sales tax on groceries and food ingredients, but only after a revenue bump from the state’s obligation to desegregation funds would become available.

With approval of HB 1039 by the tax panel, the bill now heads to the full House for consideration.

The Republican-controlled House Revenue and Tax committee also approved SB 5 by Sen. Bill Sample, R-Hot Springs. That bill would raise an existing timberland tax from 15 cents to 20 cents per acre.

It would raise an estimated $700,000 annually for the Forestry Commission. State Forester Joe Fox said the money would allow his agency to purchase up to 3 new bulldozers to fight forest fires. Fox said the tax, which has support from the timber industry, has not been raised in 20 years.

A letter from Americans for Tax Reform, led by anti-tax crusader Grover Norquist, said that passage of SB 5 in conjunction with HB 1039 would not violate the Taxpayer Protection Pledge signed by many GOP members of the legislature.

“… if HB 1039 is passed first, followed by SB 5, then Americans for Tax Reform will be certain to inform Arkansas taxpayers that your vote in favor of SB 5 is NOT in conflict with the Taxpayer Protection Pledge because the effect would be a net tax cut,” the Norquist letter read.

SB 5 now heads to the full House for consideration. If approved, it will go to Beebe for signature or veto.

The Senate has also passed two other tax cutting measures.

SB 463, which would exempt armed services personnel from Arkansas income taxes, is awaiting House discussion. The bill would adversely impact state revenues by an estimated $7.2 million and would apply beginning in the current year.

HB 1399 would add a deduction for state income tax purposes for volunteer firefighters on reimbursements for the purchase of firefighting equipment or equipment lost in the course of fulfilling their firefighting duties. Its estimated fiscal impact to the state would be around $48,000 annually. The Senate has not acted on the measure yet.